Crash Course Chapter 20: What Should I Do?

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This chapter is the final integration of all the prior chapters and attempts to provide clarity around the question of, “What should I do?” Let me rephrase that. What should WE do? Because the changes that are potentially coming are not solvable alone.

Chapter 20 is not going to be a simple list of things to do. Instead, it will reflect my goal of each person assuming responsibility for their own actions.

Chapter 20 is going to provide a framework for action. This is a way of structuring all the myriad things you COULD do, into the prioritized list of things you WILL do. Consider it your personal risk-mitigation plan.

I’m already drawing up plans for a new follow-on series of videos that will lay out my proposed solutions for the nation and globe in more detail.

Okay, so you’ve seen the entire Crash Course, showing how the Economy, Energy, and the Environment are interlinked. Specifically, you’ve seen that there is a substantial mismatch between an economic model that must grow and a physical world of peaking oil and depleting resources. We cannot possibly solve any one of these main issues in isolation, because doing so will simply create new problems in one of the other “E”s. Truly non-status-quo solutions are called for.

Which means there is a very real chance that our collective path will not be a linear extrapolation of the present. Our individual challenge is to accept the possibility that the future may be quite a departure from the present.

I believe that the future is not some purely random roll of the dice, and that we can minimize future disruptions in our lives by taking actions today.

In one way I am glad to have waited to produce this final chapter, because we have had the great financial panic of the Fall of 2008, and we can more precisely map where this is all headed.

The multi-trillion-dollar bailout packages offered to banks by various governments across the globe are nearly 100% dedicated towards preserving the status quo.

But at the same time, none of these challenges or trends are going to be helped in the slightest by bailing out the banking system, and some will be made worse. The fact that our national leaders have chosen to go several trillion dollars further into debt in a desperate bid to preserve "what was" simply indicates that it is now even more probable that the burden of meeting these challenges has shifted a bit further towards private citizens and small communities.

Part of the complication with developing a “what should we do” chapter is that I have no idea where your beliefs lie. Everybody exists somewhere along this spectrum of belief, ranging from expecting a rather ordinary, if not slight, interruption in economic growth, all the way on up to a big breakdown. Everybody exists along here somewhere.

And depending on where you happen to sit, both the number of things you could do, and their urgency, increase dramatically.

Given this, where do we start? How do we get started, when there are so many variables and things that need doing?

This is why we need a framework for action.

There are four sequential steps to this framework. First, you have to decide that you are going to take action. Without this commitment, there’s not much point in continuing. Second, you need to take stock of where you are, and here I propose a self-assessment that will unearth your strengths, weakness, opportunities, and threats. Third, you’ve got to sort among the infinite list of things you could do, and then fourth, you’ve got to prioritize this list, because you can’t do everything. Together, these create the framework for action.

So let’s begin with Step 1 - the case for action.

First, let’s add some detail to the spectrum I laid out before. Here we might assess the potential for disruption as beginning with “status quo,” meaning that all the key risks dissipate relatively rapidly. Next on the spectrum would be a prolonged recession and all that that entails. Next we might place a collapse of the financial system on here, and finally we might envisage a collapse of government services at all levels

I am pretty certain that our future lies somewhere along this spectrum; the problem is, I don’t know where. The key here is that I cannot entirely rule out any particular outcome. I can’t place a probability of zero next to any of these, so I need to weigh them all.

So let’s play a little thought game with one of them and see how it might lead to making a case for action. Let’s use #3 – Financial System Collapse.

Without worrying about how likely or probable a financial crisis might be, let’s simply say it is either true or it is false. That is, it either happens or it doesn’t. Hopefully we can all agree that “true or false” pretty much covers the total range of possible outcomes.

And down on this axis, we’ll say that you either prepared for this crisis in advance or you did not. Again, it is either true or false that you chose to take steps to mitigate the impact of a financial crisis.

So what happens if it’s both true that the crisis happened and that you did prepare as best you could? Congratulations - give yourself a smiley face; you did the best you could.

And what about the case where the crisis did not happen and you did not prepare? Again, congratulations - you did the best you could. It turns out that these are essentially equivalent outcomes, and we can therefore remove them from our decision framework. In each case, we got the best outcome we could, so there’s not much to be gained from weighing and comparing them.

But what about this case, where the crisis did not happen but you did prepare? How bad could that be? What’s the worst that you could put in this box? Well, you probably wasted some money (maybe the opportunity to participate in capital gains in the stock market) and some wasted time, but perhaps worst of all, you ended up feeling foolish. That’s awful.

Now let’s compare this box to this other box, where the financial crisis happened but you did not prepare. What can we put in this box? Here it’s possible that you suffered a massive loss of wealth, had to make sudden, massive adjustments under the pressure of little time and scarce resources, and live with a sense of recrimination for having been “right” in your concerns but unprepared nonetheless. You can probably put a bunch more things in each of these boxes, and you should. But for our purposes, we’re done.

Now all we have to do is compare these two boxes. That’s it. In the scheme of things, which is worse? Where would you rather be? We are all built differently, but I am the sort that could never forgive myself for being right but unprepared. I can more easily forgive myself for being wrong and prepared. But that’s just me. Only you know which of these two boxes carries more weight for you. But if you picked the upper right box, then I need to ask, “What’s preventing you from taking action?”

Here’s a slight refinement of this thinking that allows for more subtlety than “true or false.” Suppose that we revisit our spectrum for a financial crisis that spans from “it’s not too bad” all the way to “everything breaks down and stops working for awhile.” Let’s assume that everyone has a different assessment of how likely any particular outcome is.

We might find that one person assesses the chance as very low that anything too bad will happen, while another person holds a nearly opposite view. In one important respect, they hold the same view; they both hold the possibility of a bad outcome as being greater than zero. When an outcome has a potentially huge impact, a prudent adult may decide to react to that risk, even though it is not very probable.

As long as some risk exists in your mind, and as long as the potential costs of not taking action are outweighed by the costs of taking action, then it makes sense to take action. That’s the case for action.

Okay, assuming you’ve decided that taking action makes sense, the hard part is where? We’ve been talking about some very big changes in the Crash Course, so where does one begin in this enormous universe of potential actions?

It consists of three main areas. Your financial self-assessment should include your current & future needs, your current & future income, taking stock of all forms of wealth, and any issues concerning accessing your wealth that apply.

There are similar sorts of areas to cover that I am calling foundational that are equally as important, if not more, than the financial areas. Lastly, there are all of your physical needs to consider. A typical result of conducting a self-assessment is discovering that our lives are very much dependent on a lot of things we take for granted.

Once you’ve got your self-assessment complete, you have a pretty good idea of where you are strong and where you are not. The self-assessment, then, is your starting point – it represents your position in relation to the outside world.

Now we need to go to the outside world and rank all of the possible risks and challenges that exist, that we will then match against our self-assessment.

The three dimensions that we will use to begin bucketing the various events and risks are time (that is, how near or urgent is the risk or event), impact (is this a big deal or a little deal?), and likelihood (which is the same as the probability of the event).

To get a handle on time, consider grouping events on a timeline. In the first Horizon, which I see as running from zero to two years out, I place the housing bust, a credit bubble burst, and the possibility of a systemic banking failure. A bit further out, I foresee petroleum demand and supply crossing, issues with boomer retirement, and the possible emergence of very high inflation. Even further out, I see really big, hairy challenges like national insolvency, perhaps the end of fiat money, and the emergence of a new economic model.

Since I can’t respond to all of these at once, I mainly focus on those that are within the immediate Horizon. Again, you could place very different things in each of these Horizons, and those would be the ones you would use. These happen to be mine. For illustrative purposes, we’ll run through an example based on the possibility of a systemic banking failure.

Next, I segment things by Impact and Likelihood. If you understand insurance, you already understand this next process. Think of fire insurance on a house. We don’t carry it because such an event is especially likely (it is not), but because the impact is so catastrophic. That is, a prudent person will combine impact and likelihood to come to the decision that purchasing fire insurance makes sense.

So here’s a way to do that for the other areas in your life. Suppose we construct a simple 2x2 chart, and on this axis we break the likelihood of the event into “High” and “Low” buckets, while on the other axis we split the impact into “High” and “Low” buckets.

So something that is both low impact and low likelihood is something that we should not ever spend any of our precious time or resources on. Things that fall here are just not worth worrying about.

Anything that is high impact and high likelihood is a slam-dunk. We always attend to these, and we do them first.

Things that are of high impact but low likelihood require more thought, but generally we would usually attend to most of the things in this box next. After that, we’d sometimes attend to things that are low impact but high likelihood, especially if they happen to have easy or quick remedies.

So this becomes the area where events fall that I attend to. How you happen to fill this in will depend on your age, financial means, family situation, and a host of other factors

Because I consider there to be a 50% chance of a systemic financial collapse over the next 2 years, I place this as a high impact/high probability event, meaning that this is a risk that deserved and got a lot of my attention.

So let’s continue with the example. With this two-by-two grid in our minds, we might flesh out the risks associated with financial system collapse using a table that looks like this.

First, we might assess the likelihood of widespread bank closures to be “high,” the impact to be “high,” and therefore the rank of this event as “high.”

Then we might come to the same conclusions about our own personal banks. But we might assess the overall rank of a disruption in the food distribution network as “medium,” and dollar destruction as “medium” because it has both a high and a low which average out to medium. We might assess cuts to government spending as “low.” These are a few examples. Other things can and should be added to the list.

The point here is to assess the likelihood and impact of each event that we think applies to the scenario we are studying. When you’ve completed this, we’ll have a ranked list of events.

My recommendation is that when you do these exercises, that you do them with like-minded friends…they will think of things you will miss, it’s more fun, and will go faster.

Now you’ve got to generate a list. You do this by filtering those events that are imminent, likely, and of high impact, through your self-assessment. I guarantee when you do this, you will end up with an entirely too long list of things that you could possibly do.

It’s time to prioritize.

First, the list can quickly be broken into things that you can or will do, and things that you can’t or won’t do. One person might feel completely empowered to move their wealth around; another might have their wealth locked in an irrevocable trust.

Of the things that you can or will do, we will break those into three tiers of action, such that Tier 1 is always started and completed before beginning Tier 2, which will always precede Tier 3. This makes it much easier to get started, because the lists are much more manageable.

Of the things that you can’t or won’t do, your options include finding someone else who can do them (and this is where community comes in), or letting them go and not worrying about them anymore.

Back to our example, let’s suppose that after filtering your ranked events through your self-assessment you came up with a nice long list of actions that you’d like to undertake. Almost certainly, there are too many to do all at once, and it is time to use the three-tier system to identify and tackle the easiest, lowest cost, highest bang-for-the-buck stuff first.

So what is Tier 1? It consists of the easiest, quickest, and cheapest items that require minimal outside assistance and no substantive changes to lifestyle. In this example, then, we might decide that taking a bit of hard cash out of the bank would provide a reasonable buffer against the risk of being without purchasing power, should the banks and ATMs go “on holiday” for a while. This is easy and very do-able. Our major risk would be feeling a bit foolish later, after nothing happens and we go to redeposit that money in a bank. We might also decide to spread our bets around, just in case the bank holiday was not universal and only applied to some banks. Lastly, we might decide to hedge against the vast loss of purchasing power that the people of Argentina experienced while their banks were shuttered. Gold represents one of the few ways to hold a money-like asset entirely outside of the banking system. And we’d do all of these things before even thinking about starting the Tier 2 list.

And so we proceed to Tier 2, which consists of those Items that plug the biggest gaps in your self-assessment and require a significant investment of time, money, and energy.

For instance, implementing a saving program so that you can afford needed items, or thinking about ways to create a food buffer for your community, or getting involved with your neighbors and local scene to a greater extent.

After these items have been gone through, it is time to consider the Tier 3 items - the hard stuff. These are the biggest changes or life decisions on your list, such as changing where you live, or acquiring new skills, or maybe changing your job. The point is that you should resist the urge to spend any time or energy mulling these over until you’ve made serious progress on the Tier 1 and Tier 2 actions.

If all of this seems like too much work, and you were hoping Chapter 20 would be a more directive and simplified “here’s what you do” shopping list, I can only say that there are no easy answers for the magnitude of the challenges we face. This chapter could easily be an entire course itself, and future videos on my site will explore these questions in greater detail.

What I have been consistently trying to prepare people for, the whole way along, is that the next twenty years are going to be unlike the last twenty years.

Specifically, I think we each need to be prepared for a financial catastrophe – not because we are 100% sure it will happen, but because we can’tbe 100% sure it won’thappen. Prudent adults identify and manage risks.

And I think we each need to be prepared for the possibility, the possibility, that a disruption in our basic support systems could happen. The things that surface in this line of thinking are considered very “out there” in today’s society, but barely 100 years ago our complete dependence on the just-in-time delivery of the basics of life would have been considered mad.

Lastly, I think the future is going to be about moving from an “I” to a “we” culture…back to a bygone era, where neighbors weren’t just nice to each other, but relied on each other. As an informed person, it is now your responsibility to help others as best you can. Perhaps this will be with their knowledge and consent; perhaps you will have to be more indirect if they are not yet ready to confront the changes.

And so I close with a personal call to action. Now that you’ve completed the Crash Course, I hope you’ll agree that the challenges we face are not being adequately addressed at the national or international levels. I created the Crash Course specifically to reach people, one at a time, because I hold the belief that some of the risks we face are moving much, much faster than the political process. I created the Crash Course so that you would understand what is going on and to do my very best to help you appreciate that the future could be quite different than the past.

I need your help spreading the word. The Crash Course has been seen by hundreds of thousands of people all across the globe, without any advertising on my part. This is because people like you have taken the time to pass it along to their friends, relatives, and coworkers. But I want it to be seen by millions. We need to create a tipping point of awareness around these issues.

And so I need your financial help, because I have dedicated four years, and much of my bank account, towards creating this body of work and then making it freely available to all. If you have gotten something from this, if this has touched you or even changed your thinking in an important way, then I hope you’ll consider “paying it forward” by making a financial contribution so that somebody else down the line gets to see it. How much? I would suggest an amount that is neither a stretch for you nor embarrassing.

The Crash Course needs to be seen in the halls of power, I need to train others to deliver the message, I need to travel to take the show to venues both large and small, I need to support the development of multiple language translations, and I need to expand the content, shrink it, add new material, and keep the whole effort moving forward.

In whatever way you can contribute to that, even if that’s sending the link along to one other person, I need your help. I will do my part if you will do yours. That is my promise to you. Because after all, the future will be defined by what WE do. Thank you for listening.

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Thank you so much, as a teenager of the twenty-teens I found your crash course very helpful.I used to think of economy as something bureaucratic, remote and rather dull. This course has made me understand that economics is more than gray men in fancy suits and inexplicable numbers flashing on a screen. It is part of our everyday life, and far more interesting than I presumed it to be.